Markets Hub: London Whale Lessons

What did we learn from the London Whale debacle (apart from the fact that bank CEO salaries apparently are touchable)? Deal Journal blogger Dave Benoit stopped by the Markets Hub this morning to discuss the findings of a J.P. Morgan internal task force that looked into the $6 billion mess.

While the company made a big show of the task force’s results, and took an ax to CEO Jamie Dimon‘s salary, it’s worth wondering what lessons, except maybe “don’t get caught,” J.P. Morgan has learned from the episode.

Regardless, the task force did draw several conclusions. From Dave’s Deal Journal post this morning:

1. CIO’s judgment, execution and escalation of issues in the first quarter of 2012 were poor, in at least six critical areas.

2. J.P. Morgan didn’t make sure controls and oversight of CIO evolved along with the unit’s increased complexity and risks, as the unit had grown its balance sheet rapidly. The report lays the blame here at the foot of the then-CFO Doug Braunstein and the head of the CIO Ina Drew, saying they both “missed a number of opportunities during the first quarter to meaningfully challenge the trading strategy.”

3. The report concluded that the CIO Risk Management lacked the “ personnel and structure” to manage the portfolio, including a new CIO Chief Risk Office, Irvin Goldman, who had started at the time the trades were going on.

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